Fiscal deficit is a challenge for Colombia's next government, says economist

Colombia holds the first round of new presidential elections this Sunday (31). The three favorite candidates are: Iván Cepeda, representing the Colombian left; Abelardo de la Espriella, from the extreme right; and Paloma Valencia, from the Democratic Center party.

In any case, Colombia's next government, regardless of who wins at the polls, will face at least three major macroeconomic challenges: resuming economic growth, controlling inflation and, above all, controlling the fiscal deficit, according to Ernesto Revilla, chief economist for Latin America at Citi, in an interview with CNN Español.

Colombia has one of the largest fiscal deficits in Latin America, which is expected to reach 6.4% this year, with public debt already approaching 61% of GDP. With this, Revilla warned that the priority, regardless of the result of the presidential elections, is immediate action in the fiscal area.

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"The first priority of the next administration, whatever it may be, must be to convince the population and the markets that the fiscal situation will be put in order," he declared.

Citi's chief economist for Latin America also pointed out that the Colombian economy has been recording growth below historical potential, in a scenario marked by the reduction in private investments and the loss of investor confidence over the last few years.

In addition, inflation remains above the target established by the Colombian Central Bank, which causes the monetary authority to maintain higher interest rates than expected, which, in Revilla's assessment, contributes to limiting the expansion of economic activity.

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Despite the challenging scenario, Ernesto Revilla highlighted that Colombia maintains some favorable factors. Household consumption continues to support part of economic growth, while exports remain competitive amid the reconfiguration of global trade.

"Latin America in general, and Colombia in particular, are well positioned. Exports remain competitive and the devaluation of the dollar at a global level has benefited the Colombian currency", he analyzed.

According to estimates from the International Monetary Fund (IMF) cited by him in an interview with CNN Español, Colombia will need to promote an adjustment equivalent to around three percentage points of GDP to reestablish fiscal balance. For him, although the challenge is significant, it is still within a level considered manageable.

The second round, if no candidate obtains 50% plus one of the votes this weekend, will take place on June 21st.

*With information from CNN Spanish

**Content produced with the help of Artificial Intelligence, reviewed and published by the CNN Brasil editorial team

Source: CNN